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Hometap advertises the ability for you to access the equity you’ve built in your home without a loan — no interest, no monthly payments. Instead, you allow Hometap to invest in a percentage of your equity in exchange for a lump sum payment you can use toward renovations, vacation or bills. But the agreement lasts only 10 years. And if by the end of it, you don’t have the money to pay Hometap back, you could be forced to sell your home.
Loan types | Home equity investment |
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Minimum credit | 600 |
Other fees | Expect to pay a 3% service fee as well as home appraisal, title and government fees that can add up to $1,600 or more. |
Available States | Only available in: AZ, CA, FL, MA, MD, MI, MN, NC, NJ, NY, OR, VA |
Working with Hometap involves entering into an investment agreement that provides you with a cash lump sum of your home’s equity. In return, you agree to give Hometap a stake in the value of your home’s future selling price, typically between 5% and 15% of your home’s appraised value.
Hometap is willing to invest as much as $400,000, depending on your home’s value and built-up equity. And the amount of equity you tap into can’t be more than 30% of your home’s total value.
You have up to 10 years to settle the investment, either by sharing the proceeds of your home’s sale or paying off Hometap’s stake. If your home’s value goes up in that time, that’s great for both you and Hometap. If the value of your home goes down, the company shares in your loss.
Let’s say you own a home that’s valued at $200,000. You’re looking to invest about $30,000 into a kitchen renovation, but you aren’t interested in the payments and terms of a home equity loan.
You could instead enter into an investment agreement that offers Hometap a 15% stake in your home — what the company calls the Hometap Share — providing you with $30,000 cash up front:
Let’s further say that you hold out on settling Hometap’s investment for the full 10 years of your agreement. If your home appreciates at the 3% national average over that period, it could be worth $268,783 at the end of the decade.
How much you end up paying Hometap to settle comes down to the investment estimate prepared at the time of signing up. The company says its share of the change in value depends on how much your home appreciates or depreciates. It’s likely the company takes its 15% equity stake — $40,317 — in addition to a percentage of the appreciated value of your home, depending on your agreement.
You must buy out Hometap’s share in the value of your home at the time of settlement. You can pay this amount from your savings, refinance with a loan or give Hometap their percentage from the proceeds of selling your home.
There’s no guarantee that Hometap will make a profit on its investment at the end of the 10-year term. For example, if home values go down, you could end up paying back less than the original investment. However, if prices spike in your area, you will end up paying more. Hometap says that it puts an annual appreciation cap of 20% on the amount of money it can make.
If you find yourself unable to buy out the investment, your agreement allows Hometap the right to force the sale of your home at the end of the 10-year term.
Hometap doesn’t have a stake in the value of appreciation that’s the result of renovations. So, if the renovation increases the value of your home by $25,000 or more, you can request an adjustment to the investment agreement that excludes the renovation appreciation from the home value used to settle the investment.
That means if you add a bathroom that increases your home’s value by $50,000, you may be able to exclude that $50,000 from the amount used to settle Hometap’s investment percentage.
No monthly payments or interest is a selling point. But Hometap is not a free service.
Hometap’s 3% fee is deducted from the amount you receive, and you can expect to pay a series of other fees to satisfy the agreement.
Fee type | What it is | Average cost |
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Closing fee | Upfront fee similar to a lender’s fee | 3% of the investment amount |
Home appraisal | Process of property valuation | $600 to $800 |
Title charge | Notary, attorney, reporting and settlement fees | $700 to $800 |
Government filing | Recording and completing paperwork with state and county | $350 to $1,000 |
Both Hometap and a home equity loan give you access to the equity you’ve built in your home. But unlike Hometap, with a home equity loan, you’ll know exactly how much you’ll end up paying back at the end of your loan term. While a loan requires approval and a monthly payment, including interest, you can end up paying less in interest if you contribute a little more than required each month.
Here’s what you might pay to borrow $30,000 through a 10-year home equity loan on a $200,000 home:
If you’re unable to pay back Hometap’s investment, the company can force the sale of your home. That’s true if you default on a home equity loan as well, but you could end up paying more with Hometap, depending on how much your home appreciates.
Hometap advertises online prequalification in 30 seconds through a short quiz on its site.
Criteria the company considers includes:
If you don’t plan to stay in your home for more than 10 years, an equity investment agreement with Hometap can be a way to access your equity without a loan.
There are potential drawbacks of Hometap’s investment as well, especially when it comes to something as important as your home.
Tap into your equity in six steps: